In both our personal and professional lives, one statement remains true: resources are limited. Whether it’s money, time, or manpower, we constantly evaluate whether what we receive is truly worth what we invest. This everyday thinking mirrors a core concept in governance and business Value for Money (VfM).
Value for Money goes beyond just getting the lowest price. It assesses whether an organisation uses its financial and non-financial resources economically, efficiently, effectively, and fairly to achieve its objectives. To understand this fully, we must explore the four pillars of VfM.
The Four Pillars of Value for Money (VfM)
1. Economy – Minimizing Cost Without Sacrificing Quality
Economy focuses on obtaining the right inputs goods, services, or resources at the lowest possible cost without compromising required standards.
In the public sector, this often means adhering strictly to procurement laws to ensure transparency, competitive pricing, and fairness.
2. Efficiency – Maximizing Output With Given Resources
Efficiency examines how well an organisation transforms inputs into outputs.
It answers the question: “Are we getting the highest output from the resources available?”
Efficient operations eliminate waste, streamline processes, and optimise the use of time and effort.
3. Effectiveness – Achieving Intended Results
Effectiveness measures whether an organisation has actually achieved its objectives.
It focuses on results: Did the activity or project deliver what it promised?
An effective initiative produces meaningful outcomes that justify the investment made.
4. Equity – Fairness and Inclusiveness
Equity ensures that the benefits of a project or programme are shared fairly among stakeholders.
It promotes transparency, participation, and accountability throughout the resource-use and implementation process.
Why VfM Matters: Key Considerations
To determine whether good value for money has been achieved in acquiring goods or services, organisations must assess:
- Quality of inputs
- Cost versus benefits
- Fitness for purpose
- Resource utilisation
- Timeliness of delivery
- Convenience and functionality
One of the most reliable ways to ensure transparency in these areas is through a Value for Money (VfM) Audit.
What Is a Value for Money (VfM) Audit?
A VfM audit is an independent assessment that evaluates whether resources were used economically, efficiently, and effectively. The emphasis on independence ensures that the review is unbiased and credible.
VfM audits examine how resources were used compared to the project’s intended purpose. While they are commonly requested by governments and NGOs, private companies are increasingly adopting them to strengthen corporate governance and reassure shareholders.
A high-quality VfM audit reviews a project in three phases:
1. Preparation Stage – Planning for Smart Resource Use
At this stage, VfM supports:
- Accurate budgeting
- Identifying reliable funding sources
- Setting realistic cost estimates
- Strengthening donor proposals
A well-planned project reduces waste and increases the likelihood of achieving its intended outcomes.
2. Implementation Stage – Ensuring Performance Matches Plans
During execution, VfM monitoring helps organisations:
- Track project progress
- Identify deviations early
- Prevent cost overruns
- Respond quickly to unexpected events
This ensures that resources remain aligned with project goals.
3. Evaluation Stage – Measuring Results Against Objectives
At completion, VfM assessment evaluates whether:
- Costs were reasonable
- Objectives were achieved
- Benefits justify the expenditure
- Resources were used fairly and efficiently
This stage often involves tools such as cost-benefit analysis, social return on investment, and results-based management.
Core Components of a VfM Audit
1. Auditing Economy
This involves examining transactions and verifying whether resources were acquired at the right quality and price. It aims to minimize waste and prevent misallocation of funds.
2. Auditing Efficiency
This step assesses whether the organisation achieved optimal output with the resources available. Good planning, organisation, and control are essential.
3. Auditing Effectiveness
Here, auditors verify whether the project met its targets and delivered the expected results.
Useful VfM Audit Checklist (Aide-Memoire)
Auditors typically ask questions such as:
- Are there cheaper but suitable alternatives?
- Is there duplication of processes?
- Have deliverables met expected targets?
- Can results be improved without extra cost?
- Are costs justified by the outcome?
- Are results aligned with project objectives?
- Are any materials or equipment redundant?
- Are assets adequately protected?
Conclusion
Embedding a strong Value for Money culture promotes accountability, transparency, and good governance. When VfM assessments are conducted objectively without bias or ill-will they help organisations use public and private resources prudently, strengthening trust and improving development outcomes.